The Setup:

Let’s wrap up our four-part series on Social Security misunderstandings by talking about the dreaded ‘T’ word. After years of paying the government, you might not think that you have to send more money their way when you start claiming your benefits. We’re going to clear up that subject today by explaining how taxes are calculated for an individual’s Social Security and how we work with our clients to lessen that burden.

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Click the timestamps below to skip to a specific topic in the episode.

The Combination and Key Points: 

Social Security benefits are a big part of retirement income for most people but how much of it will you actually be able to keep? Your benefits are exempt from taxes even thought you might have heard differently at some point.

This is part four and the final installment of our series on the top Social Security misunderstandings and today we’re talking all about taxes. How much will you have to pay once you start receiving your benefit? How is it calculated? We’ll break it all down and make it easier to understand on this episode of Unlocking Your Financial Future with Ben Schrock, who is NSSA accredited.


Goals for 2020

With this being the first episode of 2020, let’s check in with Ben to find out if he’s set any goals for the year. That’s always an important part of turning the calendar page, right? We all get a fresh start so let’s take advantage.

0:35 – What goal has Ben set for 2020?


Did You See These News Headlines?

Whenever we find news stories that impact investing or have some sort of financial angle, we bring them to the show and get Ben’s reaction. Today, we have two good ones. First up is Charles Schwab announcing the option to buy fractions of shares rather than full shares. What is the benefit of this for the investor?

The second story comes from the ridiculous category. A couple in Pennsylvania found an extra $120,000 in their bank account. Instead of letting them know, they spent it all and now face felony charges.

2:26 – In the News: Charles Schwab announced they’ll soon allow clients to buy and sell fractions of stocks. Why would a person want to do this instead of buying an entire share?

4:05 – In the News: A Pennsylvania couple is facing felony charges after their bank accidentally put $120K into their account and they went out and spent it all.


Social Security Taxes

On to the main topic today, which is taxes on your Social Security benefits. There’s a misunderstanding that you don’t have to pay any taxes on this money, and while that might be the case, it’s not for many people. You could be taxed for up to 85% of your Social Security benefits and that’s really an eye-opening number for people.

We want to clear up any confusion on this subject today. We’ll walk you through how the IRS determines your tax obligations, how we approach this with our clients, and ways to offset some of this liability. No one wants to head into retirement without an understanding of how much income they’ll have and this is important part of knowing that number.

6:25 – On to the main topic on Social Security. The misunderstanding is that you don’t have to pay taxes on Social Security benefits. 

6:48 – Anywhere from 0-85% of your benefits can be viewed as taxable income.

7:28 – So how can we determine what our personalf tax obligations are going to be?

10:00 – Not every state taxes Social Security. Ohio is one of those states.

10:25 – What are some ways we can offset taxes to decrease the amount we’ll pay?

Thanks for listening to another episode of Unlocking Your Financial Future. We’ll talk to you again next week!



Related Content:

Part 1- Is Social Security Going Broke? 

Part 2 – What Age Should You Claim Social Security?

Part 3 – Choosing the Best Social Security Claiming Strategy